Edited version of private advice

Authorisation Number: 1052251910571

Date of advice: 22 May 2024

Ruling

Subject: Early stage innovation company eligibility

Question

Does the Company meet the criteria of an Early-Stage Innovation Company (ESIC) under subsection 360-40(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') for the period DD MM YYYY to DD MM YYYY?

Answer

Yes.

This ruling applies for the following period:

DD MM YYYY to DD MM YYYY

The scheme commenced on:

DD MM YYYY

Relevant facts and circumstances

Background Facts

The Company is an Australian proprietary company incorporated in Australia on DD MM YYYY. The Company is not part of an income tax consolidated group and is a single company with no subsidiaries.

Person A is the sole director and shareholder of The Company. The Company is in the process of formalising additional appointments to the board of directors.

The Company's registered office and principal place of business is situated at XXX.

For the financial year ending DD MM YYYY, The Company incurred total expenses of less than AUD$1 million and had assessable income of less than AUD$200,000.

The Company's equity interests are not listed for quotation in the official list of any stock exchange, either in Australia or a foreign country.

The Company is undertaking a capital raise with investors who may wish to access the early-stage investor tax offset during the YYYY income year. The capital will be used to assist in the funding, development, and rapid commercialisation of its invention.

The Company possesses several MOUs and strategic alliances with key partners that will facilitate further investment into and development of the technology, as well as expansion of offtake opportunities once the project is operational.

Product Development

The Company is seeking to develop the first stand-alone, world-leading production mechanism integrating XX and XX located in XXX.

The XX, industrial-scale mechanism is intended to be cost-effective and environmentally sustainable.

The Company will seek to develop a pilot plant trial to test and develop the invention, prior to implementing full-scale production.

Commercialisation Strategy

The Company is solely focused on commercialising its XX and XX production mechanism. The Company is in the early phases of raising capital and conducting research and development and supporting activities to bring its technology to market.

Further development and testing activities are required on the production mechanism.

The Company is genuinely focused on commercialisation. The Company's development and commercialisation team are fully committed to the translation of its product ideas into reality and have established a business structure and plan to do so.

High Growth Potential

The value proposition of the Company's product addresses a local and international addressable market opportunity of approximately $X based on research conducted by The Company.

The Company's market during the first several years of commercial operation is likely to include those regions/countries that have regulatory frameworks that are defined as easy to navigate.

Scale up the business.

The Company's business model is scalable and is based upon the building on the innovation and success achieved.

Prior to entering global markets, development work needs to be undertaken to meet regulatory requirements, identify and substantiate product claims and then, gain product acceptance in the market as a solution to the market's problems and aspirations.

Broader than local market.

The Company has identified that the global market is large, continues to grow and currently lacks innovation. The opportunity to develop new products in this market appears to be significant.

Product differentiation and reputation enhancement could possibly lead to an increase in global market share through sustainable competitive advantage.

Competitive Advantages.

The Company is an Australian Company that will be creating Australian jobs and products powered by Australian innovation, and accordingly eligible for certain grant funding and co-funded opportunities.

The Company is the only Company in Australia, that is known to be on the path to developing this mechanism.

The Company is confident that being the first business to develop its products it will have significant potential value in the market.

Information provided:

You have provided a number of documents containing detailed information in relation to The Company's product, including:

•         Private Binding Ruling ('PBR') submission dated DD MM YYYY.

•         Various documents including an Investment Proposal and Attachment to the application.

We have referred to the relevant information within these documents in applying the relevant tests to your circumstances.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Subdivision 360-A

Income Tax Assessment Act 1997 section 360-15

Income Tax Assessment Act 1997 section 360-40

Income Tax Assessment Act 1997 section 360-45